Apolipoprotein E (Apo E) is a class of protein, called an apolipoprotein, that occurs throughout the body. Apo E is essential for the normal metabolism of cholesterol and triglycerides. After a meal, especially high fat meals, like pizza with beer, the post-prandial lipid load is packaged in lipoproteins and secreted into the blood stream. The apolipoproteins, including Apo E, function to help transport the lipids and cholesterol to various organs in the body, and assist in the conversion of these lipids to various fats, sugars that fuel the human body, and cholesterol that serve as key components of all cell membranes. Specific receptors on the liver help clear the cholesterol and lipid rich lipoproteins from the blood. A certain amount of lipid content is essential for human life, but too much lipid content decreases the liver’s ability to clear lipoproteins, which can lead to atherosclerosis, the buildup of cholesterol rich lesions and plaques in the arteries. Atherosclerosis is the major cause of cardiovascular disease, peripheral artery disease and cerebral artery diseases, and can cause heart attack, loss of limbs and stroke. Defective lipid metabolism plays an important role in the development of adult onset diabetes mellitus (Type 2 diabetes), and diabetics are particularly vulnerable to atherosclerosis, heart and peripheral artery diseases.

Apo E is naturally occurring and is a public domain molecule that has been extensively researched since the 1980’s. The importance of Apo E as a key mediator of lipid and cholesterol metabolism is illustrated by the fact that the liver has a specific class of receptors that bind only Apo E. More recent research has demonstrated that Apo E has unique protective effects on the artery wall. One of the leading lipid/atherosclerosis laboratories in the US is at the University of Alabama at Birmingham (UAB). In 2010, our founding scientist, Dr. Dennis Goldberg, licensed a group of Apo E molecules for commercial development. Specifically, these molecules are classed as Apo E mimetic peptides. The UAB scientists adroitly engineered the 299 amino acid native Apo E into a smaller 28 amino acid molecule that can be delivered therapeutically. Our lead peptide, AEM-28, contains an amino acid sequence that anchors into a lipoprotein surface while also providing the binding domain to the Apo E receptor in the liver. In effect, AEM-28 acts like a docking system, attaching itself to lipids in the blood stream while its other binding domain seeks heparan sulfate proteoglycan (Apo E) receptors in the liver. The liver then processes these excess lipids and excretes them from the body. This sequence is part of a process called reverse cholesterol transport and is the body’s natural mechanism for reducing cardiovascular risk.

We are developing AEM-28 for an orphan (rare disease) indication called Homozygous Familial Hypercholesterolemia (HoFH), in which patients suffer from a genetic absence of LDL receptors in the liver. Without LDL receptors, the patient cannot process LDL (the “bad cholesterol”) and life threatening cardiovascular events often occur in early adolescence and young adulthood. AEM-28 is able to bypass this genetic defect by shifting LDL uptake to the Apo E receptors that remain functional in these patients.

Whereas AEM-28 was well researched and characterized by the scientists at UAB, it has a relatively short remaining patent life (to 2020). As an orphan drug in the US, it will have seven years of marketing exclusivity post FDA registration. Accordingly, AEM-28 remains a potentially valuable commercial asset.

Our LipimetiX joint venture has a license agreement with our academic research partner that provides for new technology developments. As part of our collaboration with the scientists at UAB, LipimetiX has provided continued support to the laboratory of the inventing scientists. This collaboration has resulted in the discovery of new Apo E mimetic peptides. Recently, we have been testing an analog of AEM-28 that we have named AEM-28-02. In rigorous preclinical testing, AEM-28-02 is showing itself to be potentially more tolerable and more efficacious than AEM-28. In July, we filed a patent application on AEM-28-02 as a unique and novel molecule seeking 21 years of composition of matter patent protection.

AEM-28-02 is a game changer in that its potential 21 year patent life will allow us and/or our future Pharma partners to develop it for “clinical outcomes” indications that require very large, lengthy clinical trials. These markets include acute coronary syndrome (estimated $10 billion in annual market size), peripheral artery disease (estimated $3 billion in annual market size) and Type 2 diabetes (estimated to be an approximate $35 billion annual market for all drug therapies). Now, with AEM-28-02, we believe we have a drug candidate that not only serves the potential $200 million HoFH market, but serves much larger indications potentially representing several billion dollars in annual product revenue.

Our strategy is focused on proving the efficacy and tolerability of this Apo E mimetic drug class through Phase 1a and Phase 1b/2a trials with AEM-28. Our Phase 1a data have been positive and we are awaiting results of the Phase 1b/2a study for release late in Q4 2014. We plan to develop the new molecule, AEM-28-02 as well, given the large target markets it may serve.

The mechanism of action for AEM-28 and its analogs is already well established. It is specifically differentiated from other cardiovascular drug classes such as statins and PCSK-9 inhibitors. As a result, our Apo E mimetics will likely act synergistically with other cholesterol lowering drugs. The take-away is that AEM-28 clears lipoproteins using a natural pathway and also provides atherosclerotic lesion regression prevention effects on the artery walls. We believe AEM-28 to be the only product in development with both effects.

Thanks for listening. I will share more of our program story next month.

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Statements in this blog post or otherwise attributable to Capstone regarding our business that are not historical facts are forward looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from predicted results. These risks include the factors discussed in our Form 10-K for the fiscal year ended December 31, 2014, and other documents we file with the U.S. Securities and Exchange Commission.

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